Marigay McKee Is the New Master of Saks Fifth Avenue

The new president of the retail giant has arrived from London with a single-minded goal: to return America's iconic department store chain to glory

ENLARGE

MCKEE TO THE CASTLE | The executive is leaving behind the London gardens she tends herself for an apartment overlooking the Met.
Photography by Robi Rodriguez for WSJ. Magazine

By

J.J. Martin

Feb. 13, 2014 1:58 p.m. ET

WHEN MARIGAY MCKEE needed to recharge between top gigs at Harrods and Saks Fifth Avenue, where she recently took over as president, she did something unusual: She climbed more than 17,000 feet, to Mount Everest's base camp. Yet even on her Himalayan sabbatical, McKee couldn't resist conducting an on-site focus group.

In Kathmandu, among the bustling chowks, cashmere goats and Buddhist temples were eight American women also adventuring. When McKee noticed one of them carried a Saks handbag, she saw an opportunity and pounced. "I didn't tell them what position I was going to go into at Saks, but I was like, 'Oh, you've got a Saks bag, tell me about Saks,' " McKee says, settling in to an evening cup of tea at her four-story town house in London's Ealing district.

To another ear, the ladies' conversation may have sounded as thin as the high-altitude air, but for McKee, it was rich research. The women, from all over the U.S., talked for hours, and they helped McKee realize a key piece of strategy: Each Saks storefront must appeal to a distinct customer. "The woman from Seattle has a completely different set of wants from the woman in Palm Beach," explains McKee, who came on board after Hudson's Bay Co., a Canadian retail conglomerate, bought Saks last July for $2.4 billion. Geographical sensitivity is just one part of the overall goal to change the course of Saks and resurrect its prestige.

In her almost 15 years at Harrods, McKee helped expand the London landmark into a billion-dollar-plus sales machine, while working her way up from a beauty director to the store's chief merchant, overseeing most retail offerings. McKee is a saleswoman at heart, and she's bringing that approach to Saks: Know your customer, know your merchandise and know your market results.

McKee recalls the surprised reaction to her fashion-department promotion at Harrods years ago. " 'What's the lipstick girl going to teach us about frocks and designers?' " she says, mocking the horror of some colleague. "I remember going to my first fashion week 12 years ago and people being like, 'There's no gift with purchase here!' It surprises me that most fashion buyers know everything there is to know about which trend and hemline we'll be wearing in six months but can't tell me what the density of their sales floor is, what the return is, what the dollars per square foot is, what their top-selling stock-keeping unit is and how many times they've reordered it in the season," McKee continues. "However fashionable the brand, we always start and finish with the numbers—the sell-throughs, the margins, the returns, the contributions—and then we talk about the pleasantries."

McKee was hired at Saks in September, recruited by Hudson's Bay CEO Richard Baker. In the deal, the company—which owns an eponymous chain of 90 stores in Canada as well as Lord & Taylor—picked up Saks's trophy Manhattan flagship, which flanks St. Patrick's Cathedral and faces Rockefeller Center. Baker says he has pledged $200 million to renovate that location. He also plans to install Lord & Taylors in some of Saks's less profitable locations and extend both stores' reach into Canada. (Saks also owns 72 outposts of Off Fifth, a discount operation, which does not fall under McKee's purview.) "We have an opportunity to create the single most fabulous department store in the world," Baker declares.

Before starting her job in January, McKee visited each of Saks's 41 storefronts in 22 states. She envisions the Beverly Hills Saks transformed into a hub for Hollywood stylists and actresses, while Miami's Bal Harbour outpost should cater more to its Hispanic clientele. South Florida will shed the all-black clothing that's better shopped by New Yorkers and Bostonians, and California will cut down on overcoats and heavy tweeds.

AS A COMPANY, Saks has run into the same problems that many retail outlets have faced over the past few years, with a return to a pre-2008 clip proving sluggish and unsteady. With $3.28 billion in sales, 2007 was a record-breaker for Saks. But 2008 was abysmal: Sales dropped to $3.04 billion, and the company posted a net loss of $158.8 million. The next year was bad too, with only $2.63 billion in sales and a net loss of $57.9 million. Since 2010 sales have inched back up year after year—Saks closed 2012 with sales of $3.15 billion and earnings of $63 million—but the third quarter of fiscal 2013 showed a $19.6 million loss, which is significantly bigger than the $12.3 million loss in the same period in 2012.

Back in 1924, when Horace Saks and Bernard Gimbel opened their store on the tony, primarily residential stretch of Fifth Avenue, it was a jewel box of rare merchandise. "Saks was the only act in town," recalls Leonard Lauder, chairman emeritus of Estée LauderEL-0.47% and a longtime friend of McKee. He remembers stuffing envelopes for his mother Estée's highly anticipated cosmetic launch at Saks in 1947. "It was the gold standard as far as fashion went."

In those early days, Saks carried European stars such as Chanel, Vionnet and Schiaparelli, and by the 1970s it had become the go-to store for leading American designers like Bill Blass, Geoffrey Beene and Oscar de la Renta. The premium product and presentation attracted celebrity clients such as Grace Kelly and Jackie Kennedy. But by the '80s, despite having blossomed into a national chain, the retailer had lost some of its luster. Amid more retail competition and increasingly faster fashion, Saks began to focus on midstream brands like Ellen Tracy, which targeted a mass audience. The company also went through a succession of corporate owners starting in the '70s, shifting market focus or selling off stores with each change of hands.

"When I joined, Liz Claiborne was the number one brand at Saks," says Rosemarie Bravo, who was president of Saks from 1992 to 1997. "It was a fight to bring back luxury product."

‘"When I visit stores around the world, no one takes the viewpoint of 'What would the consumer like?' but Marigay does."’

——Leonard Lauder

Under Bravo's tenure, brands like Jil Sander, Gucci and Prada came onto the floor for the first time. When Bravo left to lead Burberry, where she hired designer Christopher Bailey (now Burberry's CEO), Christina Johnson was groomed to replace her and took over as president and CEO in 2000. After Johnson left in 2003, there were several years of rapid executive turnover, until Steve Sadove became CEO in 2006. Ron Frasch joined as president in 2007, plucked from his job at Bergdorf Goodman. They executed an impressive gimmick with a new shoe floor so big it qualified for its own zip code: 10022-SHOE. But after taking a punch from the financial crisis during the all-important holiday season in 2008, the retailer resorted to drastic promotional tactics—sales that offered up to 70 percent off, for instance—that hurt its upscale image. Sadove and Frasch tried to regain ground by closing unprofitable stores, but when Hudson's Bay closed the deal last November, the two men were out, along with many of the other high-ranking executives from their reign. (Sadove could not be reached and Frasch declined to comment for this article.)

Baker says he was looking for someone "unusual" to lead in the new era, and that McKee's enthusiasm for the simple retail experience won him over after the two walked the sales floor together. "Additionally, I was enamored with the idea of having a sophisticated, stylish woman run the business," says Baker, "because, of course, we are a store for women."

To draw in those women, Saks must compete with a 21st-century proliferation of retailers outside the realm of traditional department stores. "It's a new day with the way the Internet works and the way shoppers work," says Bravo. "Saks competed with Neiman Marcus, and Macy's was against Bloomingdale's. Now the old formulas don't apply. Exclusives like 'You can only get it at Saks' used to be our calling card. Now, you push a button and get it anywhere."

The blurred lines of distribution and a dizzying mix of high- and low-end merchandise spread across stores that formerly sold either one or the other, are roiling Saks and its competitors, such as Barneys and Neiman Marcus, which also operates 41 stores in the United States, as well as two Bergdorf Goodmans in Manhattan. (Last year, before the Hudson's Bay purchase, Saks reportedly considered a merger with Neiman Marcus, whose spokesperson declined to comment for this story.) McKee's challenge will be to generate a fresh, personal conversation with Saks customers, both online and off—which is what she had done for Harrods.

When Mohamed al-Fayed and his brother, Ali, bought Harrods for almost $850 million in 1985, the Brompton Road store had already been a London mainstay for 136 years. But its cachet flagged over the next decade: The only top American brand on offer was Ralph Lauren, and the store lacked a consolidated high-fashion cool factor. "We were very luxurious but a bit old-fashioned. A little bit staid, a little bit aloof," McKee recalls of starting there in 1999. When McKee became fashion director in 2004, she immediately set about luring names like Céline, Givenchy, Tom Ford, Lanvin and Christopher Kane through the doors for the first time. "I remember inheriting a group of buyers who felt that because they were Harrods the world owed them," she says, "but that's not the way the world works." The early aughts saw sales in the mid-hundreds of millions, hitting $1.37 billion (converted figures have been adjusted at historical exchange rates) in 2007. Harrods did not face the volatility that the American market was suffering, nor the ensuing consumer hangover. In 2010, the al-Fayeds sold Harrods to Qatar Holding for a rumored $2.46 billion. Shortly thereafter, McKee became chief merchant.

"Beauty is about new product launches, exclusivity, margins, volumes, seasonal periods, opportunities, offers," McKee says, ticking each item on her fingers. "So I kind of approached fashion in the same way, and they all thought I was crazy." But her tactics lit a fire under sales. McKee filled the floor with cool, more affordable fashion from Rag & Bone, Alexander Wang and Theyskens's Theory while also raising price thresholds on the other end. The most expensive dress on the floor rocketed from $7,200 to almost $100,000.

"She is one of the most creatively driven and imaginative retailers I've ever come into contact with," remarks Lauder. He remembers her from her beauty director days when she would personally rearrange the MAC cosmetics counter at Harrods so customers could better see the range of eye shadows. "When I go visit stores around the world, no one takes a viewpoint of 'What would the consumer like?' " Lauder adds. "But she does."

McKee never had a formal business-school education. She grew up in London as a fashion-loving teenager who took ballet and rode horses. "I didn't like anything that got me too dirty or muddy," she says. She studied history and languages at Middlesex University and learned financials in the field at her first job as sales trainer for Estée Lauder in Madrid, her mother's hometown. (She speaks Spanish fluently, as well as French and Italian.) In 1999 she returned to London as a beauty director at Harrods.

"The minute I enter any store, I feel at home," McKee says, eyes sparkling. "When I walk through the cosmetics department that all my friends hate, I love it. You either have that buzz or you don't. I've definitely got the buzz."

Michael Kors saw that firsthand. "The one time I stopped by Harrods on a Saturday afternoon unannounced to take a look at my shop, within 15 minutes Marigay appeared, even though she was off for the day and actually at the hairdresser when she got the call I was there," says the designer. "Even just walking through the store with her, Marigay's eyes light up and you see she's truly fashion and beauty obsessed."

Her personal handbag collection includes the crocodile-skin "Marigay," made exclusively for Harrods by the young British designer Ethan Koh. For clothes, it's Alaïa by day, Valentino, Michael Kors and Donna Karan, Oscar de la Renta for evening and any number of the up-and-coming designers she has championed through her mentoring post with the British Fashion Council. (She plans to "embrace" the Council of Fashion Designers of America now that she's in the U.S.) As Estée Lauder once told her, "You know, Marigay, to really be the part, you can't just look the part, you have to act the part and live the part."

Living the part means 67-hour workweeks and still finding enough time to be a "hands-on mum" to Alex, 17, and Lydia, 15. (McKee and their father, a public-relations man, divorced several years ago.) McKee's mother divided the year between her native Spain and London, so she was often around London to help care for them. Alex, Lydia and the family's three dogs—Jack Daniels (a disabled miniature Chihuahua who was half-priced at Harrods), Coco Chan and Suzy Wong (both Shih Tzus)—will finish making the move to New York by the end of the school year, into a Fifth Avenue apartment overlooking the Met. Next year, Alex plans to attend NYU to help look after his little sister while mom runs Saks. "Then, of course, I found out that his girlfriend has applied to NYU," McKee adds, laughing. "So it wasn't as humanitarian as I had thought."

"I don't like my children to use the word 'boring'—ever. I don't think we can live in a world where anything can be boring," McKee says, translating her parenting rule into career terms. "Retail is about fun, it's about theater, it's about activity. My favorite saying is, 'Fear of failure is the biggest impediment to success.' "

McKee has allotted herself exactly 2,000 days to accomplish her plan, right in time for Saks's 95th birthday in 2019. (The store is basing the anniversary on the opening of Saks Fifth Avenue in 1924.) "I think we'll shock some people, please others, and I think it will be great."

I am considering canceling my WSJ Digital Subscription…..why is this article still in my face… also the same articles are repeated for days……….. Only really have to read it once a week……. borrrriiinnng………..

I hope she understands how important the smaller market stores like Richmond, VA, are to their customers. The Richmond Saks is very nice with some wonderful staff. We just hope she realizes not everything is NY and LA.

Well Marigay, why are you hiding your hands? Try ... Nail Art .. blog ... You Don't Need a Man You Need a Manicure ... and keep in mind ... Nail Art is for some of the most creative people, while others might just feel Accomplished ... don't you think ... or don't you think.

What people don't seem to realize is that at Harrods, it was exclusively a concession model...meaning Harrods was paid royalties to sell merchandise by the various designers who rented space in that store. At Saks, she'll have to deal with managing inventory for the first time, which is the difficult part about retailing. Too much inventory leads to markdowns, which negatively impact profitability. She's going from being a real estate agent to a merchant. She's also seems to think that the only thing that one must do to increase sales is to spend silly amounts of money on remodeling stores. Many retailers have learned that lesson the hard way. And Harrods was only one store, while Saks is a national chain. Her high-maintenance management style is already wearing thin among the staff. This will not end well.

This is truly an inspiring story about a woman that had never had a formal business school education. She worked her way up and I am sure she has a fresh perspective. I can't wait to see what she does with it.

Sherlock Holmes, after reading this piece would advise, "ELEMENTARY, my dear McKee....truly elementary." Any surprise shoppers in Miami ARE different that NYC, vs Beverly Hills, vs Boston.....ad nauseum? No wonder retail is in a terminal mode......

More: "…...while Miami's Bal Harbour outpost should cater more to its Hispanic clientele." I used to shop at that store. The problem is that the merchandise is all jumbled up, racks are messy and jammed, the store seems claustrophobic and crowded, some of the clothes are poorly made, and the sales people are often, well, to be charitable, uninformed and unavailable. I think the store's very upscale "Hispanic" clientele would like what most globalized upscale shoppers want: an organized, fashionable store with great sales people and merchandise that has value. As for racializing the retail experience, how would we like it if she said she wanted the Atlanta store to cater more to its "White" clientele.

"Additionally, I was enamored with the idea of having a sophisticated, stylish woman run the business," says Baker, "because, of course, we are a store for women." So, no more men's clothing? I note that menswear was not mentioned once. Hmmm...

"Her high-maintenance management style is already wearing thin among the staff. This will not end well."I'd say it won't end well for them, not her. Saks and its staff need a major tweak. The laissez-faire attitude of the current regime is what put them into a holding pattern. Her kick in the pants approach should send them back into orbit. You go girl!

Robert, I agree. My eye also raised when they felt it was important to highlight that she looks at the numbers and that is unique in their world...really? Or, that she was cutting edge because she always wanted to know what consumers wanted. Didn't we cover this last century?

Confirmation why I shop almost exclusively online - groceries still require a drive to the store (had online service but no more). I used to enjoy shopping but ...

I was living in San Francisco, right in the middle of things, where the gas stations have a least four languages. I took a few trips to Atlanta. WOW. Segregation at a horizontal line through the city center.

Going to the clubs such as the Limelight was more than being in Montana. Many hundreds of people and the only non White was in the bathrooms trying to make money handing out towels.

This comment set off warning bells for me, too, but for different reasons.

The Saks customer, as I see her, has the means to travel a great deal. If the selection at the Miami store is markedly different from the San Francisco store which is markedly different from the flagship store on Fifth Avenue, she will learn that she cannot trust the Saks brand. Ms. McKee may be all about fashion but I'm not sure she understands branding.

The Outlet stores have a wide selection for men. One trip I bought four Robert Graham shirts ($185 at the time) for $26 to 46. Mine are still some of the best he has made.

Three are wearable about anywhere in style. Two even in Montana. The other I would not wear until I went out with a Lesbian Rasta haired woman friend who was young enough to be my daughter or grand daughter.

How much fun when people ask a Lesbian if Robert, a Redxneck, is Gay. It got her a laugh.

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